DCIT CIR 4(2) (1) , MUMBAI vs. M/S. HATHWAY CABLE & DATACOM LTD, MUMBAI

The Revenue has challenged the grounds of deletion of disallowance made u/s. 14A of the Act read with Rule 8D of the Income Tax Rules.

The brief facts of the case are that the assessee is engaged in the business of cable network service and had filed its return of income dated 29.11.2015, declaring loss at Rs.188,83,18,222/- under the normal provisions of the Act and book profit u/s. 115JB of (A.Y. 2015-16) Dy. CIT vs. Hathway Cable and Datacom Ltd. the Act at loss of Rs.59,84,72,922/-. The assessee filed its revised return of income dated 28.11.2016, declaring loss at Rs.181,17,65,658/- under the normal provisions and book profit u/s. 115JB at loss of Rs.59,84,72,922/-. The assessee’s case was selected for scrutiny and reference was made to the Transfer Pricing Officer (TPO for short) to compute the arm’s length price of specific domestic transaction. The TPO vide order u/s.92CA(3) of the Act dated 23.10.2018 determined the total adjustment of Rs.4,12,47,212/- to the arm’s length price with respect to the specific domestic transactions entered by the assessee with its AE’s. Subsequent to that the A.O. dated 29.12.2018 passed the assessment order u/s. 143(3) r.w.s. 144C(13) of the Act and determined the total income at (-)Rs.162,03,070/- and book loss on Rs.44,82,54,550/- along with TP adjustment of Rs.4,12,47,212/-.

The Assessing Officer (A.O. for short) made a disallowance of Rs.15,02,18,372/- u/s. 14A read with Rule 8D of the I.T. Rules and added the same to the total income of the assessee.

In an appeal preferred by the assessee before the ld. CIT(A), the impugned disallowance was deleted by the first appellate authority on the ground that the co- ordinate bench has decided the similar issue in assessee’s case for A.Ys. 2014-15 and 2016-17 in favour of the assessee that no disallowance was called for where the assessee has not earned any exempt income.

It is observed that the assessee in its return of income and audited final accounts has disallowed an amount of Rs.45,71,862/- u/s.14A of the Act while computing the total income during the impugned year. The assessee has declared opening non-current investments in quoted equity instrument at Rs.371,58,83,005/- and closing non current year investment in quoted equity instruments at Rs.381,56,62,941/- as on 31.03.2015.

The learned Departmental Representative (ld. DR for short) for the Revenue contended that the ld. CIT(A) has deleted the disallowance made by the A.O. without considering the Board Circular No.5/2014 dated 11.02.2014 where only expenditure related to the earning of the income is to be allowed and the expenditure pertaining to earning of exempt income has to be disallowed. The ld. DR contended that the ld. CIT(A) has relied on the decision of the Maxopp Investment Ltd. vs. CIT [201] 402 ITR 640 (SC) where the Hon'ble Apex Court has not passed any speaking order on the said issue. The ld. DR relied on the order of the A.O.

The learned Authorised Representative (ld. AR for short) for the assessee relied on the decision of the Tribunal in assessee’s case for earlier years and subsequent year and also relied on the decision of the ld. CIT(A).

We have heard the rival submissions and perused the materials available on record. It is observed that the assessee has made suo moto disallowance of Rs.45,71,862/- and has also relied on the decision of the Hon'ble Apex Court in the case of Maxopp Investment Ltd. (supra), wherein it was held that when there is no exempt income, disallowance u/s. 14A of the Act is not warranted. The assessee has also relied on the decision of the tribunal in assessee’s case for A.Y. 2012-13 wherein on identical facts the assessee had made suo moto disallowances. The assessee has also relied on the decision of the Tribunal for A.Y. 2014-15 in wherein the said

By respectfully following the said decisions, we hold that the ld. CIT(A) has rightly deleted the disallowance made by the A.O. u/s. 14A r.w Rule 8D of the Rules. In the absence of any contradictory facts, we find no infirmity in the order of the ld. CIT(A) as these are settled position of law on this issue.

In the result, the appeal filed by the Revenue is dismissed.